DLH Holdings Corp. Q1 FY2025 earnings call

• Zachary thanked employees for their dedication and discussed recent contract awards, including providing C6ISR and advanced IT services to the Navy, and the strength of the new business pipeline. - Kathryn highlighted key financial metrics, including revenue, EBITDA, cash flow, and debt levels. She mentioned the company's pipeline of qualified new business opportunities stands at approximately $4 billion and the focus on using 50-55% of EBITDA to pay down debt. - Emphasis on performance excellence, accelerating organic growth, and leveraging digital transformation, cybersecurity, research and development, and systems engineering capabilities.

For the three months ended December 31, 2024, DLH reported revenue of $90.8 million, a decrease from $97.9 million in the prior year period. EBITDA was $9.9 million, down from $11.1 million last year, with an EBITDA margin of 11% on revenue. Revenue decline was impacted by factors such as the unbundling of a recompete, small business set-aside transitions, nonstrategic projects winding down, and timing of service deliveries. The largest impact was from the unbundling of a recompete, followed by the winding down of acquired small business contracts, exit from international work, and timing of services.

• Anticipate Q2's cash generation to more than offset the first quarter shortfall and lead to a reduction in debt. - Plan to utilize approximately 50-55% of EBITDA to pay down debt during the remainder of fiscal 2025. - Pipeline of qualified new business opportunities is approximately $4 billion, representing diverse mix of existing and new customers aligned with the new administration.

• Impact of small business set-aside conversions on revenue in upcoming quarters. - Uncertainty around continuing resolution and budget caps, which could lead to potential shutdowns and impact the business. - Competition sensitivity and fluidity in government acquisition processes affecting CMOP partnerships and bid postures.

Q: Could you rank the items impacting revenue decline?

A: Kathryn explained the most significant impact was from the unbundling of a recompete, followed by winding down of acquired small business contracts, exit from international work, and timing of services.

Q: Are task orders starting to come out from large IDIQs?

A: Zachary mentioned they won OASIS and are now priming opportunities on that vehicle, with bids posturing for upcoming months.

Q: Update on InfiniBite cloud product?

A: They are evolving InfiniBite cloud 2.0 to expand versatility for secure, large-scale data analytics, aligning with cybersecurity and public health security evolutions.

Q: Impact of continuing resolution on business?

A: Zachary noted anticipation of CRM mode and noise over coming quarters due to CR, caps, and debt limit, but most programs are appropriated and pipeline remains solid.